Fringe tenants seek out CBD space

Good deals on rent are putting CBD offices within the reach of an increasing number of businesses.
Photo: Nicolas Walker

by
Larry Schlesinger

A growing number of companies are taking advantage of strong rental ­incentives, good quality fit-outs and ­better amenities to move their offices from the fringes of Melbourne and ­Sydney to the CBD.

The trend could be good news for some CBD landlords, with the most recent Property Council of Australia office market report recording an 8.9 per cent vacancy rate in Sydney and 9.8 per cent in Melbourne.

“CBD incentives are at strong levels, enabling fringe tenants to secure fitted tenancies in the CBD, which have previously been out of reach," said Ashley Buller, director of Victorian office leasing for Jones Lang LaSalle.

Employers also see a move to a ­better-quality, more central CBD location as a way to retain employees by catering to their expectations.

“CBD landlords are catering for this demand by providing exclusive access to high-quality showers, ventilated lockers, air compressors in bicycle ­storage areas and offering towel ­services for a small charge per month," Mr Buller said.

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Earlier this month healthcare insurer BUPA Australia moved into new premises at Charter Hall’s 11 Exhibition Street tower, relocating from Glenferrie Road, Hawthorn. BUPA took up 11,750 square metres of space previously occupied by financial services firm Mercer, which has in turn moved into new premises at Collins Square, Docklands.

Dominic Brown, head of Asia Pacific research at DTZ, said that ‘A’-grade fringe office space is generally ­equivalent to ‘B’-grade office space in the CBD in terms of cost.

“But in a soft market it swings in favour of ‘B’-grade CBD space," he said.

In Melbourne, the development of Docklands has played a role in fringe-to-CBD office moves, with blue-chip companies such as
NAB
and
ANZ
relocating to new offices, thereby creating vacancies in the CBD. The development of Barangaroo is likely to have the same effect in Sydney when
KPMG
and
Westpac
move to the new office towers in 2015.

Mr Brown said some CBD landlords were taking their premises off the ­market, refurbishing them and trying to pre-commit new tenants at higher rates in better-quality spaces.

Other businesses to make the move from suburb to Melbourne CBD include CFD trader IG, which was previously on St Kilda Road, and transportation consultancy GTA Consultants, previously based in Kew. Both signed long leases at 55 Collins Street. – the Paris end of the sought-after CBD strip.

In Sydney, insurance group TAL has shifted from Milsons Point to take up 10,000 square metres at 363 George Street and engineering firm Theiss is moving out of 26 College Street, East Sydney, to take up about 2500 square metres at 52 Martin Place.

IG Australia director
Oliver Imre
said back-up power and infrastructure were the original drawcards, as well as “the fantastic amenity and transport services that the CBD offers".

Cadigal Office Leasing director Mark Tindale said there was an emerging trend of fringe-to-CBD moves in Sydney for three key reasons: a lack of quality options in the fringe; attractive leasing deals in the CBD; and the amenity and accessibility of the CBD.